Unionized oligopoly and vertical integration

Labor market structures may have important effects on imperfectly competitive rivalries between firms. This paper examines the consequences of unionization for the rivalry between duopoly firms in two types of contracts: vertical integration and vertical separation. If a franchise fee is used to extract the retailer’s profit, then it is in the individual interest of each manufacturer to choose vertical separation and charge his retailer a wholesale price in excess of the unit production cost, depending on the specific time structures. These arguments could make integration preferable for the manufacturer if the wage bargaining power of the union is relatively powerful.     

Labor standards, labor-management bargaining and international rivalry

Using the labor union's bargaining power as an indication of government policy on labor standards issues, we analyze the competition between a domestic (North) firm and a foreign (South) firm, and their relationship with optimal labor standards (LS). First, we show that the optimal level of LS is higher when labor unions are employment-oriented than when they are not. Second, it is higher under free trade than under the optimal tariff system if labor unions are employment-oriented. Third, ‘a race to the bottom’ of LS occurs in the case of wage-oriented unions. Fourth, the North's imposing a tariff to force the Southern government to raise its LS is effective only if the Southern union is wage-oriented. In order to raise Southern LS, both countries may need some deeper form of economic integration, if the North does not want to abandon its free trade system.     

Asymmetric oligopoly, international trade, and welfare: a synthesis

This paper analyzes the relationship between market shares and welfare under the assumption of Cournot-oligopolistic interdependence in production. The model is general enough to deal with multiple countries, oligopolists with different levels of marginal costs within each country, and any distribution of world demand across countries. It is found that the elimination of a minor firm harms the country if the country's total production is very little. However, such a policy always benefits the country if it exports the commodity. The welfare effect of production subsidies and the case of foreign ownership of firms are also discussed.     

Technology and international competitiveness

This article analyses the structure of trade and trade performance of the largest six OECD economies in the 1980s. The article is concerned in particular with the role of technology and innovation and the relationship between specialization in sectors of high, medium or low technology intensity and trade performance. It assesses the argument that the maintenance of international competitiveness requires the advanced economies to become internationally competitive, and to specialize, in higher technology sectors, given that there is increasing competition, especially from newly industrializing countries in low technology products. Section I considers the theoretical basis of this hypothesis; Section II assesses whether it is compatible with data on manufacturing trade performance in the 1980s.     

Profit tax and tariff under international oligopoly

A simple model of international duopoly is developed to examine the effects of tariff and corporate profit tax. It is shown that in an export-cum-on-site-production regime, a tariff continues to be an effective instrument for shifting net profit away from foreign to domestic firms. A corporate profit tax, on the other hand, could lower the domestic output and employment and decrease the net earnings of both domestic and foreign firms. Thus when the host government's ability to raise tariff is limited, it should seriously consider a corporate tax cut policy to achieve the dual purpose of creating more jobs and increasing corporate earning at home.     

Bandwagon mergers,international competitiveness,and government policy

This paper suggests that while the static welfare losses of merger predilections among Western firms may not be dramatic, they may lead to substantial dynamic losses when merger-prone firms need to compete with firms which instead focus on equipment investment and investments in R&D. It is suggested that such diverging investment priorities have been the real cause of the deteriorating competitiveness of many of the largest Western enterprises vis-à-vis their Japanese rivals. While mergers are generally taken to be determined by either efficiency or monopoly considerations, this paper argues that Western merger predilections are likely to be generated by a combination of imitative and defensive routines as well. That would make it difficult for firms to unilaterally break away from these competitiveness-threatening investments. If correct, this would imply that competition policies would need to be refocused. However, it is also suggested that the implications for international competitiveness should make merger questions a subject of industrial policies too. In that respect, the paper suggests some basic attitudinal changes.Earlier versions of this paper were presented at a Global Forum for Competition and Trade Policy conference in Vienna and at a EUNIP workshop at Åbo Akademi University, Finland. Financial support from the Dutch Ministry of Economic Affairs (contract nos. 54473 and 57305) and the European Commission (contract no. ERB CHRX CT94-0454), research assistance from Michel Renirie and Chee-Wai Chan, and helpful comments from the conference and workshop participants, especially Kurt Bayer and Keith Cowling, are gratefully acknowledged. Only the author is responsible for the contents of, and any flaws in the paper.     

Shadow prices, environmental stringency, and international competitiveness

Empirical tests of the relationship between international competitiveness and the severity of environmental regulations are hampered by the lack of pollution abatement cost data for non-U.S. countries. The theory of the firm suggests that environmental stringency can be measured by the difference between a polluting input's shadow price and its market price. We make a first attempt at quantifying such a measure for two industries located in nine European OECD countries. Overall, we provide (i) a new approach to measure cross-country regulatory differences in that we use a theoretically attractive measure of industry-specific private compliance cost, and (ii) empirical estimates that are an attractive tool for researchers and policymakers who are interested in examining how economic activity is influenced by compliance costs.     

Measuring market distortion: international comparisons,policy and competitiveness

This paper develops a framework to simultaneously estimate production possibility frontiers and measure distortions in factor and product markets. The econometric results, based on a panel of 61 countries over the period 1970 through 1985, reveal very little distortion in factor markets but considerable distortion in product markets. In addition, the distortions tend to vary with the cyclical behaviour of economic activity. Further, the results suggest that in order to improve efficiency, commercial policy should aim at reducing product-market distortions rather than factor-market ones.     

The question of international competitiveness

International competitiveness is advanced whenever the economic welfare of a nation is enhanced through an increase in the flow of trade or through an alteration in the conditions of trade starting from a presumed initial equilibrium. In order to describe the processes involved in securing and maintaining international competitiveness, the conventional models of international trade theory are used, namely the Ricardian, Heckscher-Ohlin, contemporary standard trade, and industrial organization models. Then, the role of the commodity terms of trade as they are manifested in exchange rates, which are affected by both short- and long-term international capital flows, is considered. Finally, possible implications regarding economic policy are briefly addressed. The author is grateful for the support in this endeavor of John Reid, Benwari L. Kedia, and Presh Daniel.     

Political polarization and international cooperation

We analyze the consequences of political polarization between domestic policymakers for international policy coordination or delegation to a common agency. Coordination is preferred under political polarization if it allows to constrain the policy of policymakers with different policy targets, while delegation allows to determine policies in the future by selecting the appropriate agent. Policymakers have different preferences concerning international coordination and which form it should take. These differences are increasing in political polarization. They agree on delegation if election outcomes are close to being random.     

Welfare effects of competitive lobbying efforts in international oligopoly markets

Conventionally, rent-seeking activities have been considered to deteriorate social welfare and to distort resource allocation. This paper examines whether rent-seeking behavior can improve social welfare by focusing on the welfare effects of firms’ competitive lobbying efforts when governments can impose market entry regulation against foreign firms. We demonstrate that competitive lobbying efforts can improve social welfare when such lobbying efforts are directed to reduce market entry barriers. In addition, social welfare can be maximized when the government shows the maximum sensitivity to the foreign firm's political contributions while maintaining competitive market structure. Moreover, it is shown that the dominant strategy for a domestic firm is to allocate more resources to R&D sectors while it is optimal for foreign firms is to exert more efforts in lobbying to reduce the market entry barriers when a government makes political economic approach in market entry regulations.     

Environmental protection without loss of international competitiveness

We develop a two‐country Cournot oligopoly model with product differentiation across countries and production‐generated pollution. The abatement of pollution by the firms in response to emission taxes is endogenous, and the number of firms can be fixed or there may be free entry and exit of firms in both countries. We propose particular unilateral and multilateral piecemeal policy reforms of emission taxes and production subsidies such that domestic industries will not suffer any loss of international competitiveness (defined in terms of either market share or profits), emission levels will be lower, and welfare could be higher in both countries.     

当代国际经济合作的趋势及特点

上世纪90年代至今，经济全球化的进程和高科技术革命的发展，对传统的国际经济合作产生了深刻的影响，这个影响至今仍在继续。笔者认为，除了七八十年代已经形成的趋势，如发展中国家在国际经济合作中的地位增强，国际贸易适当的增速支持经济增长以及服务贸易异军突起等以外，对本世纪经济发展至关重要的还有如下几个新的趋势，值得我们做深入的研究和思考。一、WTO成为世界范围维护和完善贸易秩序的重要机制国际贸易的进行和发展，需要比较合理的国际贸易秩序作为支撑环境，战后的几十年时间里，从林林总总的商品组织到联合国贸发会上震…     

Relative prices and international competitiveness: An empirical investigation

This paper examines the relationship between competitive shares and relative prices for the exports of Japan, Korea and India over the past fifteen years. For Japan the results are consistent with neotechnological theories, and may be explained by a recently explicated model which applies the logic of Hicks' induced innovation mechanism to trade analysis. For the developing countries the results are found to be systematically associated with foreign trade regimes pursued as a part of overall development strategies. Thus the applicability of typical results derivable from standard static trade theories are found to be bound or restricted to special cases defined by stages of economic development, and by policy choices.     

Measuring international competitiveness: experience from East Asia

This paper uses a new measure of real exchange rates as an indicator of international competitiveness. This new measure involves defining all prices and exchange rates on an appropriately weighted basket of currencies rather than a single currency. The measure is applied to the data for Japan, Korea, Thailand, Malaysia and Singapore. For comparison purposes, we calculate real exchange rates based on purchasing power parity (PPP) for these countries. To check for the relative performance of the two measures, cointegration tests are employed. The results indicate that the new measure tends to be closely related with the export growth for the sample countries, while the PPP-based measure is not. Moreover, the PPP-based real exchange rates tend to understate the measures of competitiveness for these countries. This result has important implications in terms of the levels of these countries' exchange rates as well as the well-known Balassa hypothesis.     

Bilateral transfers and lending in international environmental cooperation

The paper analyzes environmental lending and transfers in a two country general equilibrium framework. The lender country chooses specific environmental investments which it finances in the neighbour country on the basis of the returns they generate for the lender. The gains from this kind of international environmental financing are illustrated with a numerical calibration of the model showing that the gains to the lender country may be fairly sizable in relation to the expenditure directed currently towards environmental protection. These gains, however, essentially depend on the terms of the environmental financing. We also find that debt-for-nature swaps do not in general produce efficient environmental protection if applied uniformly in international environmental financing.     

Productivity performance and international competitiveness: an old test reconsidered

A modern adaptation of the Ricardian model is used, which incorporates monopolistic competition and multiple factors to derive a MacDougall-type relation between a country's international competitiveness at the industry level and its productivity performance. This relation is implemented empirically for Canada and the United States, using panel data for twenty-five years and forty industries. A key finding is that the Canadian-U.S. productivity ratio is an important determinant of relative shares of Canadian firms in both Canadian and U.S. markets. Trade liberalization between Canada and the United States also plays a significant role in influencing market shares. JEL Classification: F11, F12
Niveau de productivité et compétitivité internationale : un autre coup d'œil à un vieux test . Ce mémoire utilise une adaptation moderne du modèle ricardien qui postule concurrence monopolistique et plusieurs facteurs pour dériver une relation à la MacDougall entre la compétitivité internationale d'un pays au niveau de l'industrie et son niveau de productivité. On calibre cette relation pour le Canada et les États-Unis en utilisant des données pour quarantes industries sur une période de vingt-cinq ans. Un résultat important est que le ratio de la productivité entre le Canada et les États-Unis est un déterminant important des parts de marché des firmes canadiennes tant au Canada qu'aux États-Unis. La libéralisation du commerce entre les deux pays joue aussi un rôle important dans la définition de ces parts de marché.